Posted
by
timothy
on Tuesday July 22, 2008 @09:48AM
from the laundering-is-just-a-bad-word-for-privacy dept.

Ian Lamont writes "The three owners of Internet currency service e-gold have pled guilty to money laundering in the U.S. District Court for D.C.. The service is based in the West Indies, but the directors apparently live in Florida. They haven't been sentenced yet, but potentially face decades in prison and millions in fines. In addition, the principal director posted a blog entry yesterday saying that 'criminal activity will not be tolerated,' and pledging to eliminate the loopholes that allowed money laundering to thrive on the service. He also claims that e-gold has more transaction volume in a single quarter than all of the first-generation Web currency services like Cybercash, Beenz, and Flooz completed over their lifetimes. Ironically, one of the reasons that contributed to Flooz's demise in 2001 was rampant money laundering."

Conjugal visits? Mmmm. Not that I know of. Y'know, minimum-security prison is no picnic. I have a client in there right now. He says the trick is: kick someone's ass the first day, or become someone's bitch. Then everything will be all right.

As far as I understand it, the original intent of the Constitution was something along the lines of "this is a list of things the federal government is allowed to do, and if it's not mentioned here, they can't do it." So it's not an explicit bar against prohibiting gold ownership; it's probably that they couldn't bend the interpretation of one of their granted powers far enough to fit the gold ban into it.

Of course, IANAL, so take my oversimplified guess with a grain of salt.;)

Actually states rights have been continually marginalized(especially since the Civil War), which isn't necessarily a bad thing, as the Civil War and several civil rights movements have proven. Federal (congressional) law also trumps state laws, not visa versa, this is implicit in the Consitution (both original, and amended), bringing this to just an issue of "May Congress do thus".

Looking at Article 1, section 8, I could perceive outlawing gold to be along with "providing for the

Actually states rights have been continually marginalized(especially since the Civil War), which isn't necessarily a bad thing, as the Civil War and several civil rights movements have proven.

It's not necessarily a good thing, either. It was the right of the Vermont militia to stop the federal troops at the border when they came to enforce the fugitive slave act a couple of years before the civil war, for one example. It's the right of the state of California to let medical marijuana patients take their m

I would say that "states' rights" is actually a misnomer. People have rights, and states have powers which are delegated to them by the people. The important thing about the states' rights doctrine is that it served to limit the concentration of power in the federal government. In my view, power is intrinsically dangerous, like radioactivity. Let too much of it get concentrated, and the results are lethal.

You don't pay a tax for switching to gold. You only pay a tax on the CAPITAL GAIN you make if you sell at a profit. Your trading commissions and losses are actually DEDUCTIBLE.

Also, gold is no more fiat than anything else. Only 20% of it is put to industrial use. The rest is traded because people like it. If people stop liking it, down it goes. Think that can't happen? Think again. When the Conquistadors came to the West, Natives filled their coffers with gold on request. This was, only in part because they wanted to appease the Spaniards. Gold while attractive to them, was not monetary like it was in Spain. They valued jade (another scarce commodity) in that fashion. Had the Spaniards requested a room full of jade, it might have been another story.

Warren Buffet hit the nail on the head when he said: "It gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."

My own quote on the matter: "Under the current system money is managed by the Fed, which reports to Congress. Under a gold standard money is managed by international mining cartels and speculators. This is better, how?".

Then of course, there's the tendancy of gold standard advocates to ignore the history of business cycles under the gold standard (Hint, it wasn't a recession-free paradise). Why, praytell, have so many otherwise intelligent people been lured onto the gold bandwagon lately?

That is, the creation and destruction of credit by banks. Banks lent fractionally on top of gold in exactly the way they do now on top of paper. Whether the currency is based on gold or paper is irrelevant with respect to business cycles, it's the debt based nature of credit and in particular fractional lending practices which are the problem there. Gold on the other hand is naturally scarce and so would restrict inflation whereas paper is not, and does not.

I think you're seeing history inverted. I look at the 20th century, and I see cycles an interminable sequence of booms and busts mixed with inflationary and hyperinflationary phases. I look at the 19th century, and I see customer and other prices with almost perfect stability, so much that anyone could save money for bad times by simply storing it in their houses, rather than at some bank, as is required now.

You also talk about liquidity, but it was precisely the artificial liquidity created during Woodrow Wilson's government, by way of cheap loans at below market rates, that created the boom of bad investments that imploded in 1929. And then it was the New Deal that, by providing even more cheap loans and thus creating more (useless) liquidity, that extended what would have been self-correcting recession, into a full blown, decade-long depression.

I suggest you search for "1929" and "gold standard" at classic liberal sites such as the Mises Institute [mises.org] one. People usually accuse them of not using measurements as any good scientific method requires, but whenever I read them what I find the most are historical analyzes. These two search terms alone provide plenty of evidence, and good data.

I think you're seeing history inverted. I look at the 20th century, and I see cycles an interminable sequence of booms and busts mixed with inflationary and hyperinflationary phases. I look at the 19th century, and I see customer and other prices with almost perfect stability, so much that anyone could save money for bad times by simply storing it in their houses, rather than at some bank, as is required now.

In any gold-like money system (it doesn't need to be gold, anything that isn't "tamperable" by 3rd parties, be it the government or other, works the same), you have booms and busts, all right. However, they're always local booms and busts, reflecting a multitude of changes in market, be them purely economical or other (for example, externalities). In other words, while a sector of economy might become problematic, another would be booming; if that one then goes kaput, a 3rd sector would be alright; then the 1st one can recover; and so on and so forth. The end result, if you consider the economy as a whole, is that you get in average a linear rate of economical growth.

When you change this system to that of fiat money, or any other kind of money that can freely tampered with, the economy as a whole ends up indexed by the monetary policy, and as a result, instead of a multitude of economic sectors each one having its own independent booms and busts, the economy becomes a single sector where all booms and all busts become synchronized and end up happening at the same time.

The important thing on all of this is that having huge synchronized boom/bust cycles is no better than having many small independent per sector booms/busts, because the average growth doesn't change. You simply switch from a slow but regular growth, where people on difficult sectors can switch to other, growing ones, to one of a fast growth of the whole followed by a hard or full stop of said growth followed by a fast growth of the whole etc.

Thus, while from the perspective of the nation as a whole, on the long range, it makes no difference, since the booms and busts cancel each other and the result is an average growth all the same, from the perspective of the individuals the synchronized cycle system is bad, since once the single sector becomes a mess, he has nowhere to move to.

Who then actually profits from the synchronized cycles? Just one group: politicians. The "boom half" of the cycle is amazing as far as votes (and taxes, and government money) go, while the "bust half" is amazing for getting the desperate people to vote in a new savior.

I'm not a US citizen, or an economist, or some financial genius, so feel free to ignore the following:

Summary:Right now the USA is like a casino where the rest of the world uses its casino chips to buy and sell food, oil, services. Can you not see the advantage for the USA? Why should they want to switch to the gold standard, or any other standard? That would be stupid for them.

Details:The US Dollar as a global trading currency, that's _controlled_ by the USA is a good thing for the USA.

Because what that means is all the countries around the have to keep reserves of US dollars to buy and sell stuff - like _petroleum_ for instance.

So you have trillions of US dollars, outside the USA, in _foreign_ hands.

Whenever the US Gov decides to print more US Dollars, it in effect taxes ALL the other countries in the world holding billions of US dollars, and countries lending the US Gov money in _USD_. Because their USD becomes worth less, and therefore they become _poorer_.

It takes time for the countries to change their prices in USD e.g. random Chinese stuff will still cost USD19.95 for a few months or more, so in that time the USA can still buy the same amount.

It is thus easier for the US to retain its position in the rich-poor country hierachy.

In contrast if my country's gov decided to print more of its own currency - its citizens would become poorer, the rest of the world would just laugh and very quickly adjust the exchange rates, then any loans in foreign currencies will become more expensive to pay back, foreign stuff will be more expensive to import nearly overnight.

Thus as long as the USD is the defacto trading currency and the US Gov gets to control it, the USA gets a free ride and can print USD with relative freedom.

There are other ways the US prints money - The USA buys goods from Japan, China, Mexico etc, and pays them in USD. If it does not have enough USD, it issues IOUs and sells them to Japan, China et all, who buy it with USD they just got from the USA (Japan etc use the rest of the dollars to buy wheat, oil, other commodities).

It may appear a strange system, but it has worked reasonably well for quite a while.

IMO, trouble is the USA has spent a fair amount of the printed dollars in recent wars, so there is a massive "leakage" out of that system, making other countries more likely to notice the USD isn't quite worth so much, and thus forced to change their prices.

A possibly unrelated note;). Consider that Iraq started selling oil in euros, the US took it over and Iraq is back to selling oil in USD. Now Iran is selling oil in euros... Saudi Arabia the top friend of the USA has stuck to selling oil in USD.

I'm referring to the Iraqi Dinar that had a picture of Saddam Hussein, and is still currently in use in Iraq even today.

What surprised a bunch of economists with that money was that mild deflation occurred in the Iraqi economy after the 2003 Iraqi-USA war. Of course one of the interesting things was that the "presses" that made the money were no longer operating, so the overall money supply wasn't expanding and gave surprising stability to th

People who held stocks and real estate rode out Wiemar quite well! The stock market [nowandfutures.com] graph is quite interesting. Note that in the early stages the market fell, but when the inflation was raging there was actually a spike in stocks when measured in a currency that was more stable at the time (the dollar).

The buyers of stocks in 1920s Germany knew they were buying the productivity and resources of the German economy, which they figured (correctly) would make it through the inflationary period. The fundament

I never quite understood the appeal of e-gold."When civilization breaks down, I'll have a handy supply of GOLD... in an offshore vault, guaranteed by electronic certificates".

Who ever said that e-gold was intended to survive the breakdown of civilization? It was intended to be used *within* a civilization to purchase goods, pay for services, etc. It's not a place to keep your life's savings, particularly as they charge a percentage of your balance as a storage fee (like "negative interest").

Don't worry they will. e-gold was just smaller and didn't have good enough lawyers. Now that they've got a precedent set, the government will turn its attention towards paypal. The government can't stand to have any "unregulated" exchange of goods, services, or capital.

Don't worry they will. e-gold was just smaller and didn't have good enough lawyers. Now that they've got a precedent set, the government will turn its attention towards paypal. The government can't stand to have any "unregulated" exchange of goods, services, or capital.

I've seen advice to never leave significant amounts of money in a paypal account (or occasionally even a bank account that paypal knows about), because they occasionally lock it or take it away and make this hard to fix. Does this mean that these stories and whatever prompted them will go away?

Don't worry they will. e-gold was just smaller and didn't have good enough lawyers. Now that they've got a precedent set, the government will turn its attention towards paypal. The government can't stand to have any "unregulated" exchange of goods, services, or capital.

While I do agree with you, I think there's more to this than just regulation.

The US government (actually the Federal Reserve but by extension their lackeys in the government) is terrified of "competing currencies."

They come down especially hard on physical currencies, ie. Gold/Silver. Look at the recent attack on the "Liberty Dollar," for an example.

At the risk of provoking the ire of the anti-Ron Paul people, he's been talking about exactly this for some time.

Of course, it's quite possible that there actually was money laundering going on (it sounds like there was.) My point is just that these chaps weren't taken down because a) they were too small and didn't have good lawyers or b) just because they were laundering money. If you believe that, I've got a bridge I'd like to sell you...

The government can't stand to have any "unregulated" exchange of goods, services, or capital.

Like, say, cash. I really feel that the government would eliminate currency in a heartbeat if they could get away with it. Millions of cash transactions take place every day between private citizens, and the government would dearly love to have a piece of the action (as in taxes) as well as the information (who sold what to whom, and when, and why). Not to mention the IRS. (If I pay my neighbor $20 to clean my gutters because I cannot, or he gives me $50 for my old grill when I get a new one, that's income and we're supposed to be honest and report it! Yeah, right...) Cash transactions with businesses are a bugaboo, too, as the government can't easily track your purchases or link you to them. The powers that be are very upset when they can't snoop into your financial affairs.

The trend away from cash is slow, but steady. The marketplace helps: we have things like the Green Dot debit cards pushed on the lower classes, painting cash as "old fashioned," inconvenient and risky to carry around. Many government payments at all levels, like welfare/unemployment/etc. are now being paid to people not in the form of a check, but on reloadable debit cards. And the fearmongers are doing a great job associating large cash transactions with crime and terrorism -- obviously if you use an untraceable form of payment, you must have something to hide. Just try paying for an airline ticket in cash, or any large transaction (car, etc.) and you will set off at the very least raised eyebrows, and in some cases alarm bells. You can't even purchase above a certain amount in money orders at the post office now without them having to get more details from you (what they are for, where they are going, etc.). The government would adore having every single financial transaction done electronically so that every cent you spend and the recipients of your payments are trackable.

I own no plastic, save for an ATM card, and make all my purchases in cash. It's just a matter of time before this brands me as an "enemy of the state..."

Now, I don't know how eGold operates, so there may be a valid point here that I'm not getting...

But I'm rather confused by what you say. Yes, the gold standard is dead -- that is, gold is not the underpinning of federal currency. However, it remains legal to trade in gold. You can even go to the bank and buy a gold coin (or several) if you care to. (Well, you can if you have that much money sitting around...)

So it's not clear to me what you're saying is wrong with eGold. They (claim to) hold assets in gold, and use that gold to back transactions... so what?

PayPal works with electronic accounting. PayPal employees very most likely handle little, if any, of their customer's money at all. Any money handling is done at the incidental periphery of the transaction involving PayPal, but not by PayPal directly.

This was the heart of PayPal's defense in New York and Louisiana that they were not a bank, in part because they did not hold or handle customer's money directly.

US dollars are backed by nothing but the whims of the federal reserve, and it's this very fact that has brought about America's current financial predicament.

Citation, please.

Some economists believe that America's current financial predicament was brought about by deregulation of the banking system, allowing banks to create currency by lending far more than they owned. Some economists believe that the current predicament is due to huge federal budget deficits. Some economists believe the current predicament is due to trade imbalance. I'm sure there are other theories out there.

However, a gold standard is not some magical cure to ecnonomic woes, it carries its own host of problems... and the biggest problem is that it removes the ability to correct for currency valuation issues.

E-Gold holds audited stocks of gold to the value of its deposits, which is a far safer store of wealth than the US dollar.

Gold is a commodity, and thus is not a safer store of wealth than currency -- if anything, it is less safe, since there are fewer controls over the world supply of gold then there are over the supply of currency. Apples to oranges -- one cannot compare a commodity to a currency, they are by nature two different things.

If you really want to consider the problems of a gold standard, look to history. There are reasons the gold standard was abandoned, and no protestations by any number of goldbugs will change the fact that a commodity-backed currency leads to frequent boom-and-bust cycles that are devastating to economies.

The current system is not perfect, but a commodity-backed currency is a nightmare we should not revisit.

You answered your own question with your qualifier. The USD is not oil-backed... if anything, it is backed by one thing only: trust.

Effectively the US earns 1-2% annually by nature of the USD being the world's reserve currency. The fact that oil is priced in dollars (for now, anyway) contributes to this. The biggest factor, however, is the fact that the USD is relatively inflation-resistant. This is not because it is effectively oil-backed (and I'm not sure what you mean by that statement, anyway -- USD cannot be redeemed for oil with the organization that prints it), but because of the Federal Reserve's actions to maintain a low level of inflation... i.e., a fiat-based currency.

What maintains trust in the dollar is the idea that the US will maintain low inflation.

No, US Dollars are backed by (some) gold and (mostly) US Treasury bonds held by the Federal Reserve. US Treasury bonds are backed by the federal government, which has met its obligations to its creditors consistently for a long time through its unlimited power of taxation over the entire US economy.

They go after these egold folks and the liberty dollar folks because they don't want market forces to be able to leave the growing worthless dollar.

Also bet that Iran will be attacked not for WMDs but because they refuse to trade oil in dollars. These dollar monopolies are one of the few things propping up the dollar and allowing the warfare and welfare state to over-promise.

I bet the vast majority of these gold trades were not for child exploitation and laundering. They want to be able to run the printing

They go after these egold folks and the liberty dollar folks because they don't want market forces to be able to leave the growing worthless dollar.

I doubt either are significant. The market is abandoning the dollar in favour of the euro. I suppose the US could suspend convertibility of the dollar if they were concerned about that, or fix an exchange rate - but first they'd better ask Zimbabwe what happens when you start playing that game.

Ah, the fresh smell of slashdot paranoia in the morning. Are you suggesting that the only reason the dollar is worth anything is because of oil? Think about this: the WORLD spends 3.7 trillion dollars on oil a year (2008 estimate). The US produces $13 trillion worth of stuff each year. Even if suddenly everyone tried to get rid of their petrodollars at the same instant, it would not destroy the dollar (hurt it, yes, but not destroy it). There is much more to the US economy than the 'power of the dollar.' There is real production going on there.

Consider this: is the Euro safer? No, remember that the European bankers didn't change the interest rates this month because of inflation worries.

Furthermore, you are making a very bold accusation here, that the US will attack for such a small reason. Why not attack Venezuela then, or Columbia, for that matter, when an attack on either place would reward us greatly?

Some of us really don't care about money laundering. Punish people for the crime or don't, money laundering is just one of a million charges they either get to pile on top, or slap on anyone didn't feel it was any of their concern how someone makes their money.

I am far more concerned about having a service for my finances that is not subject to the jurisdiction of the United States or any government

Perhaps intentionally helping someone launder their money that you know is dirty should be a crime, since it's conspiracy to cover the trail of the original crime. Having a few people use your service who have dirty money without your knowledge probably shouldn't be.

Then how do you deal with the intentionally ignorant? (Ie, those who might be able to tell that they're being used to launder money, but refuse to look?) Is willful ignorance also illegal? At what point does that line get crossed where you "should have known?"

Money laundering is a form of aiding and abetting a criminal act. It is basically a catch-all law for various kinds of fraud that are committed with the express purpose of hiding the source of funds either because they were illegally obtained or because they weren't declared for taxation purposes.

Very often when someone commits money laundering they are falsifying other financial documents in an illegal manner. Also, in many cases there are persons charged with money laundering who had nothing to do with th

Last year Ron Paul introduced the Free Competition in Currency Act of 2007 [loc.gov] which would make alternate currencies legal, though not change other aspects of what you can do with currencies (e.g. money laundering would still be illegal).

Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand. This gave the dollar real worth. Since that time, the government has found that it can simply make more money out of thin air and spend it on government programs to generate votes. As with any supply and demand equation, when they start running the printing presses to make more dollars, the dollars you have in you bank account become worth less. You're losing money value and the government is gaining money value, but your 'taxes' are low. One can see this in inflation charts which start to skyrocket in the 1970's, relative to decades previous. Interesting note: if we measured inflation today the way we used to back then, our inflation rate would be 11% [mcgonigle.us].

The Wall Street Journal recently ran a graph showing the value of the dollar vs. gold vs. oil. If we look at the start of the decade until now, if we were holding euros instead of dollars, gas would only be about $2.70 at the pump - that extra $1.30 can be viewed as lost power of the dollar. But, the euro is no panacea either - if you compare the price of gas to the price of gold, it's nearly flat. How about $1.20 gas? I actually saw $5 diesel in CT last weekend.

Not surprisingly, the government decided to stop keeping track of 'M3' [capitalspectator.com], or the money supply of the dollar recently. Private economists have continued the calculations [shadowstats.com] and it's easy to see why the government doesn't want to talk about it.

So, back to the beginning, the government has taken irresponsible action with the way it manages the value of its currency, and they have laws preventing people from opting out of their mismanagement. Afraid of a little competition, are they? Experience shows that the most likely effect of competing currencies, even ones that mimic the way the government operated in your parents' generation, would be to pressure the government to exercise some restraint. Of course, if this competition is illegal, they'll continue with their outrageous devaluation.

Folks who think a little competition helps to keep markets fair, and monopolies hurt them, would do well to contact their representatives in government about the aforementioned bill.

The problem with tying money to scarce resources is that it doesn't allow for any growth. To grow your economy, you have to first mine the gold, and then print the money. You have to pay the miners, of course, which means that over time, you'll use up all of the gold resources which are profitable. This isn't like oil, where consumption of the good forces more difficult extraction techniques to become profitable through sheer scarcity. Rather, in a system like this, you simply must not use up your gold,

random hits to the valuation of a currency due to influx of more resources

Sure, if by "random" you mean "not controlled by the Federal Reserve". The U.S. dollar has lost over 95% of its value since the Fed was created and a deliberate policy of continual inflation instituted. The rate of inflation has itself varied quite a bit from year to year as well. Compared to the post-1913 dollar gold commodity currencies are an absolute paragon of both short- and long-term stability, with "gold standard" systems som

A gold-backed dollar is every bit as illusory as a non-backed dollar. The only thing that makes ANY currency worth ANYTHING is that people are willing to accept it and be sure they will be able to spend it themselves. Gold is no more immune to this than paper dollars in the United States - unless the fact that gold is shiny and malleable makes it carry more intrinsic value. The only reason gold has any value is that we assign it value, which exactly why money has value.

People who think returning to a gold-backed dollar would be in any way useful lack some extraordinarily basic economic education. If we were sticking to gold-backed dollars right now, gold's value would plummet just as much as the dollar's.

"The only thing that makes ANY currency worth ANYTHING is that people are willing to accept it"

Gold has been accepted by virtually all civilizations for thousands of years, probably because it can be worked, is beautiful, doesn't tarnish etc. I and many many others will take gold any day as it is more likely to keep its value than most anything else you can name.

I and many many others will take gold any day as it is more likely to keep its value than most anything else you can name.

I could say the same thing about any element on the periodic table. Point to any metal on the periodic table and you would have exactly as compelling an argument. We're not making any new platinum or copper either and both are equally useful in a practical sense as gold. Personally I find oxygen, carbon, hydrogen and nitrogen to be FAR more valuable than gold. Perhaps you don't like breathing or food?

Gold is a fine asset to own but thinking of it primarily as money [wikipedia.org] belies a fundamental misunderstanding of the difference between money and value. I suspect that gold will remain a desirable asset well into the future but I don't expect it to be a better source of value than any number of other metals.

The history of metallic money is actually pretty obvious. Unlike the paper dollar, if the entire economy built on "IOUs" collapsed, a metallic based currency is still a given amount of metal, metal which can be put to a variety of uses.

In the earliest trade & barter systems, it was inconvenient to use "cow" as the medium of exchange if you wanted to buy something that you felt was only worth half a cow. Or if your trading partner had no particular use for cows in any quantity, whole or otherwise.

Gold has intrinsic value in that it is useful. It's used in industry, for example. That, incidentally, makes it a terrible thing to back a currency on. Anyone with half a brain would know that backing a currency on oil, for example, would be foolish.

Pegging the value of money to the value of metal is stupid. Metal only has the value that we assign to it, and there's no practical difference between saying "This banknote is worth $1000" and "This piece of gold is worth $1000". As for the government printing money to pay its bills, look at Zimbabwe. Inflation, in small doses, is a good thing because it encourages you to use your money rather than hide it under the mattress where it loses value. And as for comparing inflation to serious decades, try go

Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand. This gave the dollar real worth.

To paraphrase Terry Prachett [wikipedia.org]: "This was true, so long as nobody actually asked for it." The government NEVER had enough gold on hand to back every single dollar in circulation. The last time I had a friend insist that we should be on the gold standard, I did a quick back of the envelope calculation. If you took all the refined gold in the world, all of it, and used it to back the US dollar only, then the price of gold would have to skyrocket to something like $2,000/oz. This assumes that the price would not go up as you try to buy more gold. There simply isn't enough gold, and the rate of gold production was not keeping up with economic growth in the US and around the world.

Further, I don't understand people who think that the rate of inflation should be pegged solely to the rate of gold mining. Gold isn't particularly rare in the earth's crust, but it is costly to extract. If someone were to develop new technology that extracted gold at significantly cheaper prices, your currency would collapse. This isn't unprecedented. Remember that aluminum was once considered a precious metal until Charles Martin Hall [wikipedia.org] developed an inexpensive electrolytic process for extracting it. From what I hear, there is a new technology coming down the pipe to bring the price of extracting titanium down to the level of aluminum. If something similar happened to gold, a gold-backed currency would be destroyed. In an economy with a fiat currency, you'd just start using the new, cheap gold as a good roofing material.

If you took all the refined gold in the world, all of it, and used it to back the US dollar only, then the price of gold would have to skyrocket to something like $2,000/oz.

Actually, you've just figured out a ballpark figure of how much the dollar has been devalued since we left the gold standard, when the value of the dollar was set at 1/20th of an oz of gold, eg: 1oz Gold = $20.

Another example I once read was that 1oz of gold, at $20, used to be enough to buy a very nice suit. Today, with 1oz of gold cost

I know this is not the main thrust of the comment, but it's not practical for money to be backed by gold, diamonds, beads, or fragments of mirrors. Money is backed by what you can buy with it. Then, you say, "what if the economy collapses and no one trusts the dollar anymore?" Well, I don't know about you, but I can't eat gold. Or any other precious metal for that matter. "But you can use the gold to buy food." Ah, only because people trust gold as having value while paper money doesn't. Stepping back a step further, each seems to me to be about as useful as the other for its intrinsic physical properties.

But I got off track. The main reason precious metals don't make sense as money is the fact that they don't account for the growth of the economy. To simplify things, let's create a little thought experiment and take it to the extreme. What happens when there is no more gold left to pile up in Fort Knox? Does the economy stop growing at that instant? No. People continue to innovate and create value out of nothing using only their minds and bodies. What do we do then? Switch to another precious metal of which we have more? Switch to commodities?

Or we can just trust eachother. You make something cool and sell it to someone. I make something cool and you use the money you got in your last transaction to buy my cool thing off me. We're just bartering in a huge pool with a little bit of paper to smooth the process.

To address the concerns of the last poster, all we can do is try to be as transparent as possible. And even then, the economy knows what's happening. The government increases the money supply and the inflation numbers will show it, whether they tell us or not. Just like with anything else we buy and sell. Increase supply and the money value of each individual unit drops.

To simplify things, let's create a little thought experiment and take it to the extreme. What happens when there is no more gold left to pile up in Fort Knox? Does the economy stop growing at that instant? No. People continue to innovate and create value out of nothing using only their minds and bodies. What do we do then? Switch to another precious metal of which we have more? Switch to commodities?

Continue my thought experiment, then, into the future so far that each atom of gold is worth, say, a galaxy class starship. But what if I want to exchange my pocket change for gold? I guess I just get a quark or two shaved off of a gold bar?

LOL... indeed, this is a problem I have considered, but that's a looooong way off.:-)

There's another reason not to worry about it: even taking into account population growth and a vast increase in the amount of gold and silver mined over the past 700 years, the "value"

As a commodity, the supply of gold via mining is self-regulating. If the price of gold is higher than the cost of mining it (per unit mass) then mining will continue until the price decreases--or the cost increases--such that mining is no longer profitable. In the long run, mining gold is no more or less profitable than any other enterprise. The "commodity producers" thus don't bother me; under normal circumstances they have no incentive, or even ability, to flood the market with newly-mined gold.

Last year Ron Paul introduced the Free Competition in Currency Act of 2007 which would make alternate currencies legal, though not change other aspects of what you can do with currencies (e.g. money laundering would still be illegal).

This is the sort of meaningless drivel that marks Ron Paul and his supporters as kooks.

Today, you are most certainly not obliged to use US dollars. You can use any currency you wish, provided the other party in the transaction agrees. You can take payments in beans, Swiss francs, gold or oil. Many US banks are happy to let you have an account in a foreign currency.

The only case where you are required to take US cash is for payment of a USD debt (that's the "legal tender" statement you see on USD bills).

In US states near the Canadian border, you will often see Canadian quarters, nickels & dimes, since they look very similar to US coins and have almost exactly the same value (1 USD is about 1 CAN).

Few young people realize that until the 1964-1968 time period it was possible to bring your dollars to the government and get precious metal on demand.

So? Why is gold valuable? It does have some intrinsic industrial value, but the majority of the price of gold is because people think it's valuable. Why do they think it's valuable? Because it's pretty and shiny and people think it's valuable. It's self-fulfilling. It's valuable because people think it is. The degree to which people think something is valuable varies from time to time. iphones seem to be the currency of choice these days.

The gold standard does prevent some economic problems from occurring, but causes many others. These are well known and have been studied to death by economists.

Since that time, the government has found that it can simply make more money out of thin air and spend it on government programs to generate votes.

Government mismanagement & incompetence is not something that only occurs with fiat money.

Today, you are most certainly not obliged to use US dollars. You can use any currency you wish, provided the other party in the transaction agrees. You can take payments in beans, Swiss francs, gold or oil.

False. The government will not enforce such a payment and will enforce payment in legal tender instead, at the rate its courts determine. Also it will accuse you of money laundering, and you will not be able to pay into its coffers in anything other than USD.

this is the truth, whether you like it or not: you are part of a human society. a currency is something that is only valued in the convention of human society...any money you have is nothing more than an abstract representation of your relationship with the society you live in.

They know they live in a society. The reason they want to get it out of the government's hands is because without a backed currency, the government can alter the value of money legislatively and at whim. If the money is backed by something, any individual or group is limited in its ability to affect the value of money by how much of that money they control, how many dollars they actually have in hand.

So the issue with them is not that gold is intrinsically valuable (not entirely anyway), but that having you

If you bothered to read the article you linked to, the crash was attributed to excessive, risky loans to railroad developers (a government-backed project, BTW) coupled with insufficient reserves in the banks to cover their depositor's accounts. It had nothing to do with the choice of currency.

The only difference today is that, instead of a few depositors losing most of their accounts, the FDIC has the Treasury print up however much new currency is required to cover the bank's lack of reserves, devaluing eve

E-gold is an online currency service that is backed up by gold. You cannot buy directly from them though, you have to buy through a redistributor, some of which are questionable and only takes certain forms of payment. The nature of the having a third party buy from egold and then sell to another person creates a web of denial effect for money launderes. One of the largest schemes e-gold is used for is in the credit card theft hacker rings, where it is easy to get credit card info, it is harder to "cash out". This is where "cashiers" come in, usually charging a 50 point take on cashing out for someone else. Egold, since it was in a different country, denies US Government requests for transaction records for accounts. E-gold may be in trouble, but for every e-gold there is another replacement, e-platinum, webmoney, and large handful of others. Oh yeah, btw, I didnt RTFA either, I just thought Id share what I know about e-gold, and I might be wrong about some of it.

e-gold has tried spam as a marketing tool. When they stopped that, other spammers started following suit, phishing for account info--and e-gold's response was always "it's not our problem."

They've been actively aiding money laundering, and claiming they can't control what their customers do. Even now, Douglas Jackson is talking about fixing the flaws in an otherwise good system--despite the fact that he's likely going to jail for a few years.

e-gold is a dirty operation run by dirty crooks. It should be buried deep underground, and the gold reserves (if they really exist) used for something constructive.

For whatever reason, there are times when people pay cash and have no desire to reveal who they are to the folks with whom they are doing business. (I used to relish, back in the day, going to Radio Shack and refusing to give them my zip or other information as long as I was paying cash. They thought I was weird. I thought being forced to identify myself to buy batteries was just too stupid to put up with.)

So is there any way to anonymously pay for things online? I can think of only one: buy a pre-paid credit card for cash and use it online. Non-reloadable gift cards can be purchased for cash and activated for use online under any name you can think up; there's no verification.

However, that method is inconvenient. Do the slashdot hordes know of a better, easier way that remains anonymous?

I guess I assumed most everyone was familiar with the way they used to work. Let me be a tad more verbose, then. A long time ago, Radio Shack wanted a full name and address for every purchase. If you refused that (and later, after people reacted badly to them asking for everything) they started just asking for a zip code. Thus, I always refused "to give them my zip or other information... to identify myself..."

Clear? If not, feel free to insert your own example. You must know at least one person who

This is the way I did it the last time I did it. Another poster says this is no longer possible; I'm going to test and see for myself. But the way I used to do this was:

Go to an Ace Cash Express [acecashexpress.com] store and plunk down cash for an All-Access Visa Gift card. (See the bottom of the linked page.) No questions, no ID, no nothing - you just slide $255 under the bullet-resistant glass and they slide back under the glass to you a Visa card with $250 preloaded. You can take it to any store and use it immediatel

A systemic flaw in the e-gold design, present from the very beginning, made it vexingly difficult for e-gold to expel a User, in a truly effective way, for criminal abuse of the system. e-gold investigative staff might detect suspicious activity, block or freeze the offending account, and later discover the same perpetrator had created additional accounts.

One element was logic that allowed an e-gold account full privileges from the moment of creation and only revoked those privileges in the event of suspicion that the account holder was seeking to mask their identity or actually engage in illicit activity.

Um, systemic flaw? How about important feature? Really charming exercise in doublethink there. "We're crippling the anonymity features that made this product worth a damn in the first place, but we're going to *call* it correcting a 'flaw'".

This is a bloody show trial, that's what it is. It's not good enough to just prosecute their victims, the Almighty State has to ensure they repent publicly, presumably on pain of being fucked over a lot harder during sentencing. "A systemic flaw in the e-gold design...". We have always been at war with Eastasia.

One of the biggest parts of the PATRIOT Act was to counter money laundering. Cash deposits over a certain amount, for instance, get handled differently in the USA this decade than they did in the past one.

On a side note: I missed the irony in Flooz's money laundering. Can anyone explain?

I hope you have a good toque, eh? And yes, I know what you mean - the US has been going to extreme measures for some time now. I wonder, though, why the Internet makes things all that much more difficult than, say, a bank in the Caribbean.

So then, you've been reposting a post originally written nearly four years ago, just because it irks you that Roland is capitalizing on his/. submissions? You know, there are much more serious things to get worked up about, why don't you choose a few and make yourself useful? And FYI, you can aways go to your/. prefs page and opt out of RP's stories, and then you won't have to see them anymore.

I've also been hearing that there is no statistically significant connection between CP and molestation. Of course if it really does involve violation of a child, the PRODUCER who actively perpetrated a real crime should be found. of course, that would involve buying the CP to investigate it, and possibly distributing stills of any adults present seeking identification.

As for other "black market" banes of our existence.. there's p2p filesharing (omg the poor record e

It's been a while since I actively used e-gold, but as I recall, unlike such brain-damaged systems as ACH, it was impossible for anyone but the account holder to initiate a transfer out. On the other hand, if you were foolish enough to hand out your account password to random people you were doing business with, well, hopefully you learned your lesson and won't do it again.